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The Deal: Men's Wearhouse Gains on Abboud Acquisition

Written by: The Deal07/18/13 - 3:20 PM EDT

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NEW YORK (TheDeal) Private equity firm J.W. Childs Associates LP exited portfolio company JA Holding Inc. in a sale to Men's Wearhouse for $97.5 million, the retailer announced Thursday, July 18.

The Boston private-equity firm, which acquired the fashion company for $73 million in March 2004, earned ''approximately 2 times'' in its equity investment in the sale, according to J.W. Childs partner Adam Suttin. J.W.

Childs had acquired the company from Italian publisher RCS MediaGroup. New York-based JA Holding is the parent company of clothing brand Joseph Abboud. Its other brand names include Joseph Abboud, JOE Joseph Abboud, Joseph Abboud BOYS and Joseph Abboud Home.

Menswear designer Joseph Abboud, the founder and creator of the brand, has served as chief creative director of Men's Wearhouse since December 2012.

The transaction includes ownership of JA Holding's U.S. tailored clothing factory in New Bedford, Mass., that employs 450 people. The deal is expected to close in the third quarter of 2013.

Men's Wearhouse had $155 million in cash and no debt as of May 4, according to regulatory filings meaning paying for JA Holding would hardly put a dent in the company's balance sheet.

Men's Wearhouse president and CEO Doug Ewert said in a statement that he expects the addition of the Joseph Abboud exclusive brand to enhance margins and profitability and become accretive to earnings in fiscal year 2014. J.W. Childs had attempted to sell the company before striking a deal with Men's Wearhouse, according to sources. Suttin confirmed that the firm "had other conversations" with potential suitors, but declined to reveal who those other suitors were.

Since it put JA Holding on the block since early 2011, bidders have come knocking but not at quite the right price. Among the rumored potential buyers that had looked at JA Holding were Chicago's HMX Group, which was said to have offered $90 million, and Iconix Brand Group, which had been close to a done deal, according to Women's Wear Daily, also at about $90 million.